Science and Research Committee on March 9th, 2023

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Congratulations.

That is something that you do track, though, right, as a university and as—

[Karim Sallaudin Karim]

Absolutely, and I can get those numbers if you're interested.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

That would be great.

How many of your patents are now owned by non-Canadian organizations or individuals?

[Karim Sallaudin Karim]

That's a good question. Again, I will have to go back and get the answer to that. I wouldn't be able to answer that off the top of my head.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Okay. Can you submit that as well?

[Karim Sallaudin Karim]

Yes.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

You mentioned in your opening remarks that companies are not willing to come into Canada and invest in Canada. Why not? Can you expand on that a bit?

[Karim Sallaudin Karim]

I indicated that Canadian SMEs may not be able or capable of investing in deep tech. I think there are companies from the U.S. and elsewhere that wish to benefit from our innovation pipeline, because our own local businesses are unable to capitalize on it.

The reason why our local businesses are unable to capitalize on it is primarily that, first of all, they don't have a very large presence in the high-tech space. You don't have something like an Apple, a Google, a Facebook or an Intel that is such a large enterprise and has so much revenue that they have a very rich research focus. We don't have that in Canada.

We have smaller and medium-sized enterprises, where most of the day-to-day activity focuses on product development, sales and commercialization of existing technology, and maybe on incremental innovation. You don't see a lot of people taking a lot of risks. That's why I would suspect that we don't do too well on the new deep-tech front.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Do you know much about the investment atmosphere in the United States versus Canada or anywhere else? Do you know of certain regulations or tax codes or something that are standing in the way of this, and where someone would take on that extra cost if government could get out of the way or if some legislation could get out of the way? Is there something that we could look at in this study?

[Karim Sallaudin Karim]

That's a great question.

Again, I do have personal experience in this space, but I'm not aware of any tax limitation on why somebody from the U.S. would not invest in Canada. That being said, there is a preference for American investors to try to invest in the United States, potentially because there are states that have very favourable labour laws and very favourable acquisition laws.

Oftentimes, when an American company or American investor wants to come into Canada, they will advise the Canadian company to set up a U.S. Delaware office. I am aware of that, but I don't believe there is anything fundamental—at least, off the top of my head—that would prevent an American company from directly investing in Canada, other than just an intrinsic fear of the unknown.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

This question is for both of you. I'm going to quote from a report of the Institute for Research on Public Policy:

...the majority of patents filed by research teams with at least one Canadian inventor are assigned on the date of issue to firms outside Canada or to foreign subsidiaries in Canada. And of the patents that are assigned to Canadian residents, a significant portion are subsequently sold to foreign entities.

It is my understanding that around 50% of the Canadian-invented patents are transferred to foreign firms. Can you explain why this is happening and how we can keep IP in Canada? I think my colleague Mr. Williams has commented on this before. If we can keep that technology and that IP in Canada, that's more generation....

I'm sorry. I didn't realize that I was out of time. It went fast.

[The Vice-Chair, Conservative, Corey Tochor]

You're 20 seconds over right now, so we're going to have to ask for a written response.

Once again, I do not like to cut off witnesses, but MPs need to manage their time.

Moving on to the next five-minute round of questioning, we have Ms. Bradford.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Thank you, Mr. Chair.

Thank you to both witnesses today. You bring very interesting and different perspectives to this important discussion, and I thank both of you for being here.

Being from the Waterloo region, I will be directing my questions to Professor Karim.

Also, I wanted to refer to MP Williams' earlier questions with respect to venture capital or whatever. We have invited Chris Albinson, the CEO and president of Communitech, to be a future witness. I did a round table recently. He has all those answers for you. I'm going to focus on IP, but I really hope he is able to come, because there is a lot of information there about venture capital and how it's working and all of those things.

In looking at the IP perspective, Professor Karim, could you comment on how the newly announced ElevateIP program helps address some of the challenges facing IP? Right now, it is funding these hubs across the country, and I'm glad that they go from out west down to Halifax as well. How is that going to help companies ramp up? As you know, the challenges are always in the ramping-up process, it seems, not in the starting-up process.

[Karim Sallaudin Karim]

Absolutely. Thank you, Ms. Bradford.

The government has announced money for this ElevateIP program. ElevateIP is supposed to help business accelerators and incubators get the tools to Canadian start-ups to understand, manage and leverage their IP. That's the purported reason for the creation of the ElevateIP program. As such, universities are perhaps not as closely involved as potentially business accelerators and incubators might be. The money is being provided to help start-ups understand, manage and leverage their IP.

From a start-up perspective, one of the biggest challenges is.... We all know IP is important. The question is how we pay for it, because IP is expensive. This program is helping us understand and manage the IP from a start-up perspective, but I don't know if it's going to enable us to pay for IP.

When you think about a start-up, a typical start-up might raise anywhere from $300,000 to a million dollars in its first few years of operation. If I talk about how much it costs to file a U.S. patent, from filing to issuance, you're looking at anywhere from $25,000 to $30,000. That can add up very quickly and become a very significant portion of the start-up's costs. I think it's a good program, but I don't know if the goals that it's purporting to meet will actually be met.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

On the university's website, there is a bit of a warning message there. It says:

In an academic environment, it is common that IP creators might be involved in presenting their research at conferences, or publishing in journals, or thesis defense proceedings...or having preliminary discussions with potential research funding partners.... All of these activities could represent public disclosure that if not carefully managed could restrict your ability to secure broad patent protection.

In the academic context, is there a tension between the movement for open science, and the push for protection and commercialization of IP?

[Karim Sallaudin Karim]

Again, that's a fantastic question, MP Bradford.

Absolutely, there's a tension, but you have to learn to manage the tension. In general, at Waterloo, we educate our researchers on the importance of IP and the importance of having this discussion with the university tech transfer office in advance of publication. Should those researchers reach out to us, we immediately file the IP.

It's relatively inexpensive to file a provisional, and it buys you a full year to file the full patent. In that gap, the IP is protected, and the researchers can then publish without the same concerns that were noted before. There is definitely a piece there on education for people to know that this is important.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Are there areas where Canada is excelling in IP commercialization? Are there areas we need to support better, such as in academia or certain business sectors? Could you elaborate on that?

[Karim Sallaudin Karim]

Canadian pharmaceutical IP, from what I understand, does quite well. Unfortunately, we don't have a very large pharmaceutical company within Canada to truly reap the benefits, but from an IP perspective, we generate a lot of IP in the pharma space.

We also generate a fair bit of IP in the tech space. On the tech side, we are doing reasonably well with start-ups, especially our high-tech start-ups. For example, in Waterloo, like I mentioned, Velocity has created $35 billion of enterprise value over the last 15 years, which is quite staggering coming from one little region.

There are some bright sparks. If someone were to ask, “What should we be focusing on?”, I would say that we should be focusing on growing our start-up ecosystems. Start-ups offer us the best chance to create these large behemoths that can compete on the international stage with other countries.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

And Velocity knows how to turn them out.

Thank you so much.

[The Vice-Chair, Conservative, Corey Tochor]

On to our two and a half minute round, we have MP Blanchette-Joncas.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

Ms. Beauger, Earlier, we were talking about how difficult it was in Canada to stimulate funding from private businesses. I'd like to quote a few items of data. As you know, if things are to improve, you need an overview of the situation that you can acknowledge. However, not everyone is aware of the situation.

Of all the OECD countries, in 2019, Canada ranked 24th in terms of private sector funding for research and development. That's 24th out of 37.

Can you give us an explanation for this low level of productivity in Canada?

[Nadine Beauger]

Thank you for the question.

I can comment specifically on the situation for companies in the pharmaceutical sector. Unfortunately, as we were saying, the capacities of pharmaceutical companies in Canada are relatively limited because they have focused on the marketing and sale of products rather than on research and development. That seriously limits the Canadian companies' potential for direct funding.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Ms. Beauger, I'm going to have to interrupt you. Time is getting short and I want to move on to the next question, which is related to your answer.

Quebec, mainly in Montreal, has for a long time been considered an economic hub in the global pharmaceutical industry. The companies located there include Merck Canada, Pfizer Canada, AstraZeneca Canada, Boehringer Ingelheim Canada and GlaxoSmithKline. They were all in Quebec in the 2000s.

You joined IRICoR towards the end of that decade. You were the president and chief executive officer for about seven years. You know that these companies didn't shut down because it was cold in Quebec in the winter.

Why did these Companies leave Quebec and Canada?

Was Canada the only G7 country, yet again, not to produce COVID-19 vaccines?

[Nadine Beauger]

I'll answer the first question briefly.

The tax incentives are a factor. I believe that there is really a way to improve the situation by increasing tax incentives for pharmaceutical companies. I believe that we were very innovative in retaining the human capital of these companies.

As we previously mentioned, several companies shut down in Canada. However, the people who had been trained at these companies ended up in the broader university ecosystem, mainly at the IRIC Drug Discovery Unit, where we are based. The unit is made up of approximately 70 highly qualified people who came from the pharmaceutical companies. They are therefore able to contribute to the development of university research as it moves towards the next value inflection point.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Ms. Beauger.